From CUBA MONTHLY ECONOMIC REPORT
SPECIAL ISSUE, August 1997
The lack of transparency of Fidel Castro
government in Cuba is very well known. Information about the inner
workings of the government, however, is becoming available, though in a
fragmented way as high Cuban government officials defect and freely
report their experiences in Cuba. The information reported in this
special edition of the Cuba Monthly Economic Report comes from just
such a source—Jesus M. Fernandez, who left Cuba in May 1996 after
holding important positions in the Cuban government, including
Secretary of the Food Committee of the Cabinet and Secretary of the
Foreign Exchange Commission of the Food Group.
The July 28, 1997, issue of Forbes magazine
lists Fidel Castro as one of the richest people in the world, with a
net worth of $1.4 billion. Forbes' estimate of the funds that Castro
controls may be low, however; it merely assigns to him 10 percent of an
estimate of Cuba's gross domestic product. In fact, in addition to
controlling the Cuban economy, Castro possesses and personally controls
international bank accounts and large amounts of gold and commodities,
and has done so virtually from the start of the Revolution.
"Fidel's Checking Account"
What today is referred to in the innermost
circles of the government as "the Comandante's reserves" had its origin
in 1959 in the famous "Fidel's checking account." From this
account—which proved to be an administrative nightmare to Cuban fiscal
authorities, being subject to no control or budget—Fidel Castro drew
funds with which to satisfy all manner of needs and requests throughout
the Island, instantly creating an image of himself as powerful
benefactor. It was then that it was decided to create an account in
Castro's name, not related to his official titles, that he would
personally manage without giving an accounting to anyone. This account,
which was in pesos, served as precedent for later creating a dollar
account to finance international transactions, primarily of a political
nature. This dollar account was used to finance subversion in other
countries and propaganda activities such as the meeting of the
Though the amounts involved are not known,
the account was financed from state funds and from the forced exchange
of dollars from Cuban workers at the American Naval Base in Guantanamo.
In that account were also deposited foreign funds whose purpose was to
finance insurrections in Latin America.
In 1970 it became known that the proceeds
from the sale of cattle to Canada—the intermediary for which was Merejo
Curbelo, brother of the Minister of Agriculture, Comandante Raul
Curbelo—were deposited in Castro's account. The magnitude of the sale
has been estimated at between $5 million and $10 million. Sales of
cattle have continued to this day and have included Venezuela as a
buyer. The cattle come from another of Fidel Castro's exclusive
reserves, which contains some 50,000 head of cattle.
Also in 1970, Emilio Quesada Rey,
excolleague of Fidel Castro at the University of Havana, created an
integrated system of reserves under Castro's exclusive control. These
reserved consisted of automobiles, trucks, tractors, and other wheeled
vehicles, and general construction equipment. By then, reserves of
housing, also managed by Fidel Castro, were in existence. From these
reserves Castro assigned resources to productive enterprises without
any sort of plan and provided gifts to many of his collaborators and
allies, both at home and abroad.
The Comandante's Reserves
In 1976, the State Committee for the
Provision of Technical Material was created under the direction of
Provisions of the Central Planning Board (JUCEPLAN). Irma Sanchez, a
member of the Central Planning Board, was placed in charge of the new
committee as Minister-President. The new committee would become the
most powerful organ of the Cuban government, since it centralized
control of the country's physical resources, with the exception of
foodstuffs, clothing, and shoes. The resources it managed included
equipment and machinery, petroleum, and construction and raw materials.
The new committee expanded the reserves
personally controlled by Fidel Castro. By then~, those who knew of them
at JUCEPLAN referred to them as "the Comandante's reserves." The
reserve of automobiles, for example, came to number 7,000 units, which
were stored outside in the area of Managua, south of Havana. The
reserve of trucks, which also numbered in the thousands, was kept in
Alberro, in the area of Cotorro in the province of Havana. These
reserves were administered by Castro separately from the planning
system, which he himself did not trust; he assigned resources and
equiment only to projects he initiated and directed. This system caused
a great deal of discomfort among the middle-level economic planners,
and it generated friction and strong disputes among Vice Minister of
the Central Planning Board Luis Gutierrez, Irma Sanchez, Emilio
Quesada, Osvaldo Dorticos (in charge of the Central Planning Board),
and Fidel Castro himself. By then the lines that could have separated
what was public property managed by Castro and what was de facto
private property had been erased.
At the start of the war in Angola, in the
middle of the 1970s, Castro's financial reserve was funded in part by
monies from the Soviet Uluon and the rest of the Soviet block for
financing Cuban military operations in that country. The same was true
with respect to the war in Etiopia.
At the same time, the Cuban armed forces
accumulated large quantities of canned goods. These reserves were
located in Cuba and were maintained at great cost to the country
because of the need to renew them frequently to keep them fresh. These
reserves are currently being turned over to military personnel as
compensation for their lack of access to dollars and because they
cannot be maintained fresh as before given the economic crisis. The
reserves were never used to supply the civilian population.
At the beginning of the l980s, the sources
of funds for the Comandante's reserves were diversified. Of unknown
ownership, they were enterprises created to generate finds outside the
planning system, as if they were the private property of certain
government officials. These enterprises also served to launder drug
money, which became known during the process leading up the execution
by firing squad of General Arnaldo Ochoa in 1989. The most important of
these enterprises are the following.
The Corporation CIMEX was founded by Jose
Luis Padron, a Colonel who was assistant to Jose Abrahantes, the
Minister of the Interior who was arrested along with General Ochoa; by
Orlando Perez, expresident of the National Bank; by Regino Boti,
ex-minister of JUCEPLAN; and by Emilio Aragones, ambassador to
Argentina and one of the persons closest to Castro on financial matters
since the days of the Sierra Maestra. This corporation is a
conglomeration of export and import enterprises that currently has
chains of stores in Cuba that only sell in dollars. The most important
of these is the chain Panamericarna, which has sales of $1 million a
day. Part of CIMEX is the Treviso company, initially run by Colonel
Tony de la Guardia, who was shot with General Ochoa in 1989. The firm
sells tobacco products, shellfish, and construction materials. It also
produces knock-offs or adulterations of high quality international
goods, such as Chivas Regal whiskey or Levi's pants.
From this enterprise, the now defunct
Department MC (for convertible money) in the Interior Ministry was
created. This was a secret operation designed to get around the U.S.
embargo on Cuba. This department generated several million dollars a
year, which was presented to Castro on his birthday, every August 13.
The largest amount we know of involved a "gift" of $10 million,
delivered in a suitcase full of bills by Jose Abrahantes during one of
Castro's birthday parties in the 1980s. Part of this money came from
Independent of the net earnings of MC, CIMEX
should generate a minimum of $50 million a year, possibly much more.
There is information that on one occasion, toward the end of the 1980s,
the enterprise suffered a lose of several million dollars speculating
on the London financial markets. On that occasion, Raul Castro became
involved, severely criticizing functionaries of CIMEX for playing at
capitalism, but no one was seriously punished.
Cubanacan is a group of enterprises founded
by Abraham Masiques, a Cuban entrepreneur who is a friend of Castro's.
Cubanacan is the enterprise that open the door to foreign investment in
tourism. Like CIMEX it has several chains of stores that sell in
dollars. Cubanacan controls approximately $600 million in foreign
capital, primarily from Melia, LTI International, TRIP, Delta
International, Golden Tulip International, Cosmo World, and Super Club.
It is estimated that Cubanacan currently contributes around $30 million
a year to "the Comandante's reserves."
EI Palacio de Convenciones (literally, The
Convention Palace) contributes its net earnings to the Comadante's
account. Its eamings are generated ty international events held there,
many of a political nature. The earnings it generates are on the order
of $3 million to $5 million a year.
Cubalse consists of a single store that was
originally dedicated to selling to the diplomatic community. It is now
open to any member of the general public who has dollars. It is the
only store that always has beef, which it sells at monopoly prices. The
beef comes from Castro's cattle reserve. Cubalse's net eamings go to
enrich Castro's reserve. It is estimated that it can generate net
earnings on the order of $30 million a year.
Medicuba, which sells pharmaceutical
products manufactured in the country, especially vaccines, generates an
unknown amount of revenue that is estimated to be several million
dollars. Fidel Castro is the principal investor in the biotechnology
sector. He is kept informed of rescarch on AIDS and other programs in
Other Revenue Sources
In addition to the earnings of these
enterprises, the Comandante's reserves are also supplied from other
transactions, possibly the largest of which was the sale of rum
factories and distilleries under the Havana Club name to the French
firm Pernaud Ricard. The sale price has been estimated at $50 million,
an amount that reportedly was deposited in its entirety in the
Instrurmental in this transaction were
Alejandro Roca, Minister of the Food Industry; Miguel Castillo,
personal administrator of the Comandante's reserves; and Jose Alberto
(Pepin) Naranjo, chief of staff to the commander in chief. This
transaction continues to generate earnings for the Comandante's account
through commissions from the sale of Cuban rums and through the
currency exchange from the salaries of Cuban workers.
A part of the net eamings of several foreign
enterprises engaged in the growing of citrus also goes to the
Comandante's reserves Very gross estimates place these contributions at
not less than $10 million or $15 million. One of the best known
entrepreneurs in this sector is Max Marambio, chief of Salvador
Allende's guard. Another is Angel Domper, who is married to one of the
Che Guevara's daughters. These Chilean businessmen are believed to be
Another source of income to the Comandante's
reserves comes from loans that Castro makes to the national economy
from these funds. Whenever there is a shortfall in the flow of foreing
exchange—something that occurs frequently in the importation of food
and oil-- government officials in charge of payment submit requests for
loans through Carlos Lage, Prime Minister of Cuba. If Lage passes on
the request, Castro generally approves the loan, noting the date the
loan is due and the interest to be paid. The latter is normally 10
percent, regardless of the length of the loan. We know of two specific
transactions, one of $20 million and the other of $30 million, for
imported foodstuffs, mostly cereals, and there have been other
occasions involving the import of oil.
Back in the days when the Soviet Union
allowed Cuba to sell for dollars its oil surplus, part of the proceeds
from this implicit subsidy were suspected of making their way into the
Comandante's reserves. The reason for this suspicion is that it became
established custom at JUCEPLAN that the dollars from nonconventional
exports would go to such reserves.
In 1984, the Banco Financiero Internacional
was founded, becoming the first Cuban entity operating with dollars in
complete autonomy from the state system. It operates as a corporation
whose owners are the Cuban government and some foreign investors who
are suspected of acting as stand-ins for other persons. This enterprise
is located in the CIMEX corporation. The apparent objective of this
bank was to remove from the National Bank of Cuba actions that were
intended to 1eave no trace. The main clients of this bank, which has 16
branches in Cuba and an unknown number abroad (we know they exist in
the United Kingdom and in Canada), are the same firms associated with
the Comandante's reserves.
E1 Banco de Inversiones, SA is located in
the Someillan building in Havana and forms part of an important
mechanism that makes loans to the Cuban government at high interest
rates. It is run by Hector Rodriguez Llompart, ex-president of the
National Bank of Cuba, and a Swiss-Israeli citizen named Andre. It is
suspected that this bank's capital comes from the Banco Financiero
The operations of these two banks are so
secretive that they give rise to many suspicions, including that they
are involved in the laundering of drug money. The scandal involving the
Grupo Oasis of Spain, which operated the tourist center at Cayo Largo,
planted the seeds of this suspicion.
The Comandante's reserves, both financial
and physical, also benefit from many of the foreign donations Cuba
receives, including, for example, the World Food Program of the FAO,
which made many donations of milk to Cuba between the 1970s and 1990s.
The milk was intended for infants in the eastern provinces of Cuba, but
was diverted intead to Nicaragua for political purposes.
The above information appears to confirm
that the Cuban economy is undergoing a major institutional evolution,
in which four economic subsystems are emerging. The first is Fidel
Castro's economy, with his enterprises, financial institutions, and
virtually absolute control of the country's resources. The second
subsystem, in parrnership with Castro's economy, conists of the foreign
enterprises, allowed to generate and repatriate earnings at th cost of
helping Castro's own finances. The third system is the remains of the
old planned economy and public enterprises, including the sugar
industry, still struggling for survival but in a general state of
neglect and decay. The fourth system is the Cuban marginal private
sector, consisting of those who are falling outside the other three
systems (mainly the self-employed) and those who, though still working
in the public sector, do not earn enough to make ends meet. It appears
that the first two subsystems are thriving, while the latter two are
carrying the burdens imposed by predatory economics of the first two.
In the aggregate, everything seems to indicate that the Cuban economy
is in a freefall, with no visible solution, something similar to what
happened to Zaire (now Congo) under Mobutu Sese Seko.
Dollar remittances from exiled Cubans to
relatives in the island are playing an important role in helping some
weather the current economic crisis. However, the remittances, combined
with the alleged foreign investment activity in Cuba, are offering
Castro an excellent vehicle to hide money laundering activities.
Forbes' estimate of Castro's fortune may very well fall short of the